Daily Deal Sites

By: Avery Bowser, Kaleigh Morrison, Julia Rosenberg & Mary Wilson

#SMdeepdive

How It All Began

•2001: Vente-privee.com•2004: Woot.com•2006: over 100 daily deal sites in United States•2008: Groupon•2009: LivingSocial•2011: Scrounge

•Facebook attempted daily deal feature, but canceled due to lack of success

•According to a study released by BIA/Kelsey, gross revenues are projected to grow from the current $873 million to $3.9 billion by 2015

What is Social Couponing?

● Local businesses team up with social coupon sites● Social couponing site informs members of the

deal in their city○ zip code○ specify interests

● Social aspect:○ need minimum number of deals○ referrals=benefits for you

Most Common Sites

● Groupon● LivingSocial● TravelZoo● Yipit● BuyWithMe.com

LivingSocial

Founded in 2007Employees from Revolution Health GroupStarted with small apps on Facebook –Visual Bookshelf app–PickYourFive –BuyYourFriendADrink.com Daily deals is highest grossing aspectLivingSocial Escapes

GrouponLaunched in 2008500 markets44 countriesOwns international sites–MyCityDeal (Europe)–Beeconomic (Singapore) Groupon GetawaysGroupon Now app–“I’m Hungry” or "I'm Bored"Financial troubles

High Grossing Deals

•LivingSocial and Amazon.com offered members a $20 gift card for $10–voucher attracted 1.4 million purchases•LivingSocial offered two tickets for $9 via Fandango’s ticket service for any movie –Sold 1 million tickets in 2 days, 780,000 on day one alone•Groupon offered a seven-night resort stay for $399–2,752 bought-73% discount

The Days of Coupon Clipping are Gone!

● LivingSocial commercial● Groupon commercial

○ Super Bowl○ Controversial

Best Practices

When Groupon works and when it doesn’t.

When to use Groupon

● Excess inventory○ Clear the warehouse

● Excess capacity○ Fill the cruise boat

● Repeat sales○ Hope they come back for

more

● Additional sales○ Tempt them to buy more

● Attract a young demographic○ 68 percent of users are aged 18 to 34

● Generate buzz○ Expose your product to new customers

When not to use Groupon

● Unprepared for large influxes○ May generate demand you cannot meet

● When you never have repeat sales○ Make sure the investment’s worth the cost

It’s easy to get swept away by trends and

promises of future earnings but Groupon is not for everyone.

Calculate the Repercussions

● You will reduce your product or service by at least 50%

● Groupon gets between 30% and 60% of that reduced price

● When will you breakeven?

Case Study: Posies Bakery and CaféGroupon Gone Wrong

Jesse, Owner

“Using Groupon was the single worst decision I’ve made as a business owner thus far.”

● Publicity didn't compensate for hit to profit

● Average sale: $5● Groupon: Pay $6 for $13 of product● Groupon took 50%● Minimal training ● Sold 1,000 Groupons, valid for 6 months● Fraud● Opposite of yield management ● Lost $10,000 ● Yelp ratings fell● Minimal repeat customers

What Went Wrong?

Interview: Sucharita Mulpuru

● @smulpuru, Analyst at Forrester Research● Many consumers subscribe but don't buy● Half of deals expire unused● Aversion to more emails

Case Study: Lauren’s Salon SpaGroupon Success Story

Lauren, Owner

Lauren's Salon Spa

The Benefits of Groupon

Interview: Rakesh "Rocky" Agrawal● @rakeshlobster ● Principal Analyst

at reDesign● Occasional guest on

TechCrunch, Bloomberg TV, CNBC

● 4,000 followers

How-to groupon video

What's Next?

What experts predict for the future of daily deal sites

Will Daily Deal Sites Survive?

•Local businesses have dwindling marketing choices – old forms are slowly dying off (ex – Yellow Page directories?)•Daily Deal companies skip a risky step for merchants: advertising

The Breakdown

•Groupon: “Too big to fail right now,” but expected to fade out (think MySpace)

•LivingSocial: Less successful than Groupon, but runs “great deals” and maintains good relationships with merchants

@saparra14, representative for Scrounge: "a lot of savings for college students. Since they are still creating awareness and a customer base I think it will get really big in the year to come if they offer students coupons that will be used"

A Positive Outlook on the Future

On the other hand ...

@erichsparks, Ambassador of Social Response for @uncollege: "These companies are so young and the business model is still years from being sustainable. I don't know if they'll be able to do it. I think they'll switch from catering to "coupon customers" and focus more on retaining existing customers. At least that's what I would do."

Sites May Need to Change Policies to Increase/Continue Success

•Market is becoming over-saturated (Groupon, LivingSocial, Google Offers, etc) – companies need to distinguish themselves•Companies that focus on creating functional and emotional bonds have higher retention rates (84% vs 30%)•Companies should pace themselves

Companies Collaborate

•Google Offers distributes deals from 15+ other sites (Gilt City, Juice in the City, kgbdeals, etc.)•Groupon dismissed offer of $6 billion – now pitching IPO of $11 billion to potential investors

Going Mobile

•“Groupon Now”•Daily Deal sites rely on impulsive decisions – must advertise deal at ideal moment